Why the Apple Sell-Off Is Only Just Beginning
How and when to short the stock depends on your perspective.
That depends on your perspective. Tactically speaking, Apple's a short–term trader's dream. Expensive and marginable, it moves a lot. That means there's opportunity in both directions.
If you're one to trade earnings announcements, here's something to consider. Birinyi Associates noted to CNBC that Apple stock has "gained 70% of the time in after–hours trading on the day it reported," but 68% of the time it's closed lower on the following day, by a half a percent on average. It's already tanked as of press time, so these numbers appear pretty much worthless except as a frame of reference.
I think the more attractive price action on the short side is longer–term. I expect Apple's shares to generally trade lower through the balance of the year.
Absent some real innovation, I believe the iPad/iPhone combination will continue to lose valuable consumer ground both in terms of appeal and utility. I see this translating into reduced product appeal that directly impacts product introduction cycles and slows revenue growth.
In that sense, the real news is not what happened this earnings cycle, but the ones that are two—even three—quarters from now, when gross margins are under real pressure. It's no wonder, under the circumstances, that Apple guided lower again and declined to provide a profit forecast. I think they know it, too.
Editor's Note: This article was written by Keith Fitz-Gerald of Money Morning.
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